The Effect of Board Size and Composition on the Efficiency of UK Banks
Sailesh K. Tanna
University of Surrey - Surrey Business School; Technical University of Crete; Coventry University - Faculty of Business, Environment & Society; Centre for Financial and Risk Management, Audencia Nantes School of Management; Centre for Governance & Regulations
Cranfield University - School of Management
February 1, 2008
International Journal of the Economics of Business, 2011, 18 (3), 441-462 (Revised Version)
Coventry University, Economics, Finance and Accounting Applied Research Working Paper No. 2008-05
We examine a sample of 18 banks operating in the UK between 2001 and 2006 to provide for the first time evidence on the association between the efficiency of UK banks and two important aspects of board structure, namely board size and composition. We first use data envelopment analysis to estimate the technical, allocative, and cost efficiency of banks, and then use Tobit regression to investigate the impact of the board structure on these measures of efficiency. We estimate three specifications, one for each measure of efficiency, where the impact of each board aspect is examined individually and in conjunction with each other. In all the specifications we control for bank size, capital strength and time trends. We find some evidence of a positive association between board size and efficiency which is however not robust across our estimations. The composition of the board has a statistically significant and positive impact on efficiency across all our specifications.
Number of Pages in PDF File: 29
Keywords: Board size, board composition, banks, corporate governance, efficiency, non-executives
JEL Classification: G21, G34Accepted Paper Series
Date posted: February 13, 2008 ; Last revised: September 28, 2012
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